Zoom out/zoom in strategies For those who’ve been following me, you know my passion for the “zoom out, zoom in” approach to strategy, which I’ve written about extensively, especially here. For the others, let me summarize this approach. It focuses on two time horizons in parallel. I’m going to talk about companies in the discussion below, but this approach to strategy is increasingly necessary for all institutions, not just businesses.
The first time horizon, the zoom out horizon, is 10-20 years. On that horizon, the two key questions are: What is my relevant market or industry going to look like 10-20 years from now? What are the implications for the kind of company I will need to become in order to be successful?
The second time horizon, the zoom in horizon, is very different – it’s 6-12 months. On this horizon, the key questions are: What are the two or three initiatives I can pursue in the next 6-12 months that will have the greatest impact in enhancing my ability to reach my destination? Do I have a critical mass of resources committed to those initiatives in the next 6-12 months? How will I measure success for these initiatives?
Both horizons are required for small, smart moves. If we don’t have a destination, we’re unlikely to ever reach it. Instead we’re likely to incrementalize our way into oblivion. On the other hand, if we just have a long-term view and don’t focus on near-term impact, we’re likely to over-invest in “mega-projects” that limit our ability to learn and ultimately collapse from their own weight. So, we need to zoom in and force ourselves to pick the 2-3 most promising initiatives to pursue in the next 6-12 months. Given all the options competing for our attention and resources, that’s a tall order. Is there any more guidance that we can provide to help in picking those initiatives?
Yes, there is. I’ve developed three filters to use in assessing proposed zoom in initiatives.
Find and scale an edge First, one of the initiatives should focus on identifying and moving aggressively to begin to scale an edge of the current business. This refers to my perspective on “scaling edges” as the most promising way to drive transformation of large, existing companies. Rather than trying to drive transformation in the core, my advice is to find an edge to the current company – something that today is relatively modest in revenue, but which, given the exponential forces driving change, has the potential to scale quickly to the point where it becomes the new core of the business. Drive the transformation on the edge, rather than tackling the immune system and antibodies that reside in the core and that will mobilize quickly to resist any effort to drive fundamental change.
The zoom out effort can be very helpful in identifying and assessing an edge that really has the potential to become the new core. It’s admittedly a high bar – the edge must have the potential to become the new core in a relatively short period of time. But, given the exponential forces that are re-shaping our global economy, it’s more and more feasible to scale a promising edge with relatively modest resources. The key is to identify the edge, commit to it and be very aggressive in doing whatever we can in the next 6-12 months to scale that edge as rapidly as possible. That’s a small move that can set big things in motion.
Strengthen the existing core Second, one of the initiatives should focus on identifying the one move that can have the greatest impact in strengthening the existing core of the business. We live in a world of mounting performance pressure and the existing core is what generates our current profitability. We need to do whatever we can to prolong the life of that core, while at the same time recognizing that its life span is limited.
As I’ve indicated elsewhere, I’m a big fan of the Pareto Principle, otherwise known as the 80/20 rule – in short, 20% of the causes in virtually any domain typically generate 80% of the effects. In business, that means that 20% of the products, customers and facilities typically generate 80% of the profits. While most people are familiar with the 80/20 rule, relatively few executives systematically apply that lens to identify the 20% of the products, customers and facilities that are generating 80% of the profits.
To have the greatest impact, this second zoom in initiative needs to focus on the highest performing parts of the business today. It needs to identify missed opportunities to further strengthen the performance of these parts of the business and to address potential short-term vulnerabilities. That will help to determine what measure can be taken in the short-term with the greatest potential to strengthen and amplify the profitability of these parts on the business. That’s a small move because it focuses on a relatively small part of today’s business, but it can set big things in motion by extending the life of the most profitable part of the business.
Find something to stop doing There’s a third zoom in initiative that, in my experience, is typically the most challenging one. It requires us to identify what significant part of the business we are going to shut down or divest in the next 6-12 months in order to free up more resources to scale the edge and strengthen the core. Once again, the 80/20 rule can provide a very helpful lens here. What about the 80% of the products, customers or facilities that are only generating 20% of the profits of the business? Why are we still in these parts of the business?
I’m not by any means suggesting we need to shut down all these parts of the business – there may be good reasons why some of these parts are marginally profitable today, but have the potential to increase in profitability over time. Nevertheless, we need to become much more rigorous in addressing the need to be in these parts of the business. In the next 6-12 months, we should force ourselves to ask how much of these parts of the business could be shut down or divested so that we can free up more resources. That’s a relatively small move that could set big things in motion by freeing up resources to devote to the areas that have much greater potential for profitability.
So, there you have it. Three small moves that could set big things in motion, but only if smartly made. Bottom lineTransformation suggests that we need really big moves. Resist that temptation. Instead, focus on identifying the small moves that, if smartly made, can set big things in motion. The zoom out, zoom in approach to strategy can provide a powerful lens to smartly make small moves. It requires a balance between a clear view of one’s destination while emphasizing the need to act now to accelerate learning and movement towards that destination. That’s the essence of smartly made – having a long-term destination while emphasizing the need to identify the highest impact initiatives that can be pursued in the near-term to reach that destination more rapidly. One final note. Everything I’ve covered here can also be applied to us as individuals. We need to apply the zoom out, zoom in approach to ourselves in order to increase our own impact. If we’re smart about it, we can set really big things in motion. Now, that’s something that I need to pursue further in a future blog post!
We live in a world of mounting performance pressure and the small moves that we’re making today are having diminishing returns. That’s because they focus narrowly on preserving our scalable efficiency businesses, rather than addressing the more fundamental imperative to transform everything we do in order to build institutions driven by scalable learning.
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